Disappointing holiday retail sales reports weighed on the market Thursday, but growing optimism about interest rates buoyed rate-sensitive stocks, and the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) managed to finish a see-saw, low-volume session higher.

Today's stock market

Index Percentage Change Point Change
Dow 0.51% 122.80
S&P 500 0.45% 11.68

Data source: Yahoo! Finance.

The retail sector slumped, with the SPDR S&P Retail ETF (NYSEMKT:XRT) down 1.6%. Dividend-paying stocks rallied, sending the Utilities Select SPDR ETF (NYSEMKT:XLU) up 1.3%.

Macy's (NYSE:M) helped propel stocks of department stores downward when it reported weak holiday sales, but shares of Bed Bath & Beyond (NASDAQ:BBBY) went the other direction after its earnings report.

Several colorful stock graphs superimposed over each other

Image source: Getty Images.

Sales at Macy's slowed in December

Investors dumped shares of Macy's, sending them down 17.7% after the retailer reported surprising weakness in holiday sales and lowered guidance for sales and profit. The company saw strong sales on Black Friday and the week following, but they softened in mid-December and didn't return to normal until Christmas week.

Macy's had upbeat expectations on Nov. 14 after a strong third quarter, raising guidance for full-year sales and earnings per share. Today the company walked back that change and then some. Comparable sales for 2018 are now expected to increase 2%, versus November's guidance of 2.3% to 2.5%. Net sales are expected to be flat, rather than up 0.3% to %0.7, and earnings per share will be $3.95 to $4.00, down from guidance of $4.10 to $4.30.

Comparable sales in November and December increased 0.7% and the lowered expectations are still well above guidance given at the start of the year, but the sudden reversal shocked investors, who erased almost a full year of stock gains despite the progress the company has made recovering from a multiyear slump.

Bed Bath & Beyond meets low expectations

The story for Bed Bath & Beyond was almost the exact opposite of Macy's: After setting low expectations, the company met them in its fiscal third quarter and shares soared 16.6%. Sales increased 2.6% to $3.03 billion, just shy of analyst estimates of $3.04 billion, on a 1.8% decline in comparable-store sales. Earnings per share of $0.18 beat expectations by $0.01.

The struggling retailer, whose stock fell 47% in 2018, also expressed just enough optimism to help its cause, saying, "The Company is ahead of plan with respect to its longer-term financial goals to moderate the declines in its operating profit and net earnings per diluted share, this year and next, and grow net earnings per diluted share by 2020, and based on its preliminary assumptions, believes that its fiscal 2019 net earnings per diluted share will be about the same as fiscal 2018."

That glimmer of hope that the company could eventually turn around was all it took to give the stock a pop today.

Jim Crumly has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.